INTERIM REPORT JANUARY-JUNE 2013

Transcription

1 INTERIM REPORT JANUARY-JUNE 2013

2 1 (14) Destia Group s Interim Report for January June 2013 INCREASE OF ORDER BOOK CONTINUED AND CASH POSITION REMAINED STRONG, REVENUE DECREASED Revenue decreased by 12 per cent and was MEUR Operating result fell compared to the reference period and was MEUR 0.2. Order book increased to the level of the previous year and stood at MEUR The company has no net debt, in addition long-term loans were prematurely amortised to the value of MEUR 20. Equity ratio was more than 40 per cent. Number of accidents resulting in absence from work remained record-low. Destia Group s 2013 revenue is expected to fall short of that of the previous year and operating profit is expected to be at the level of the previous year. Group s key figures (), MEUR 4-6/ / / / /2012 Revenue, continuing operations Operating result, continuing operations % of revenue Result for the period, continuing operations % of revenue Result for the period Equity ratio, % Net gearing, % Average personnel Order book at the end of period Operating environment Uncertainty in the economy continued during the reporting period. The uncertainty caused by the eurozone crisis had a negative effect on the economic operating environment and the availability of financing also in infrastructure construction. The economic conditions of the civil engineering sector were affected by the general economic development, the public sector financial deficit, the level of costs that has remained high, and the decline in house-building construction. Public-sector infrastructure demand has remained steady during the first half of the year, but the amount of private-sector investment has declined. With the decline in the number of new major projects and the completion of projects that began in previous years, competition was tight and maintaining the level of profitability challenging. During the reporting period, no new major projects were started. Cost development in the civil engineering sector levelled out in the reporting period in comparison with According to Statistics Finland, costs in the civil engineering industry increased by 0.8 per cent between June 2012 and June The Confederation of Finnish Construction Industries RT (CFCI) anticipates a reduction of 2 per cent in civil engineering in Private investments in infrastructure construction are expected to decline more than civil engineering in general. Dull development is expected to continue in 2014 as well, as there are no new major projects in the pipeline for The volume of infra maintenance turned down in 2010 and continues to decline during this year.

3 2 (14) Order book and orders received In a challenging market environment, the company continued to invest in customer work and the Group s order book developed favourably in the second quarter. The order book increased to the level of the previous year, standing at the end of June MEUR (751.2). The order book increased by 25 per cent compared to the end of During the reporting period, Destia won the construction contract put out to tender by Länsimetro for the tunnel section between Keilaniemi and Lauttasaari. The contract includes construction and structural engineering work of the metro tunnel over a 4 km distance between Keilaniemi and Lauttasaari. Work on the contract began in early March and is expected to be completed in September Destia won the contract put out to tender by the Finnish Transport Agency for the construction of a double track in the Riippa Eskola track section. The contract entails the renovation of old track and the construction of new track over a 30 km distance. The contract also includes the construction of new linesides, bridges, service and private roads as well as the conversion of the track s electrification system to conform to doubletrack requirements. The contract is expected to be completed in November Destia won the maintenance contract for bridges put out to tender by the Uusimaa Centre for Economic Development, Transport and the Environment. The contract includes the repair of 21 bridges mainly in the capital region and is expected to be completed during Destia won the first-phase contract for street, municipal engineering and block construction in the Lakari industrial and logistics area to be built in Rauma. The contract started in February 2013, and is expected to be completed in spring In the first round of the public tendering for regional main road maintenance contracts, Destia won three regional contracts out of four. The contracts won at Huittinen, Jämsä and Pudasjärvi Taivalkoski are five years in duration. In the second and third rounds of the public tender for the regional contracts of main road maintenance, Destia won two out of five and two out of three contracts respectively. The Vaasa, Suomussalmi and Paimio contracts won are five years and Nurmes seven years in duration. Destia maintained its strong market position in the regional main road maintenance. During the reporting period, Destia won the contract put out to tender by the Central Finland Centre for Economic Development, Transport and the Environment for the upgrading of National Road 56 between Jämsä and Mänttä. The contract is expected to be completed in December Destia s Consulting Services are part of a consortium that won the project put out to tender by the Finnish Transport Agency that includes the ground surveys of the Helsinki City Rail Loop. Destia won the contract put out to tender by the Finnish Transport Agency for the implementation of Service Level Measurements (SLMs) on surfaced roads between 2014 and 2019, and the contract put out to tender by the Southeast Finland Centre for Economic Development, Transport and the Environment for the expansion of the Imatra border-crossing point, which is scheduled for completion in December Destia also won the Technopark II parking project in Lappeenranta, which is scheduled for completion in June In addition, Destia won multiple different projects of varying sizes and durations in various parts of Finland.

4 3 (14) Revenue In the reporting period, Destia s revenue from continuing operations was MEUR (216.5), and in the second quarter it was MEUR (118.4). The decrease in revenue was particularly the result of a decrease in regional main road maintenance contracts and major individual projects that were on-going in the reference period. During the reporting period, other operating income amounted to MEUR 2.1 (1.9), and in the second quarter it was MEUR 0.8 (1.2). This mainly includes property leasing income and profit from sales of equipment. The increase in other operating income was affected by a decrease of a provision resulting from a reduction in environmental liabilities during the first quarter. Result In the reporting period, operating result from continuing operations was MEUR 0.2 (4.1), and in the second quarter it was MEUR 2.5 (3.9). The operating result weakened mainly due to decrease in revenue. In the reporting period, Group net financial costs were MEUR 1.2 (2.8), which amounted to 0.8 per cent (1.3) of revenue, and in the second quarter they were MEUR 0.9 (2.2), or 0.8 per cent (1.8) of revenue. Income taxes in the reporting period were MEUR 0.3 positive (0.7 positive). Income taxes in the second quarter were MEUR 0.3 negative (0.4 positive). The Group s result for the period was MEUR 1.0 (1.9), and in the second quarter it was MEUR 1.3 (2.7). Balance sheet and cash flow Total assets on the consolidated balance sheet were MEUR (218.8) at the end of the reporting period. Return on investments (ROI) was 13.4 per cent (7.4), equity ratio was 40.6 per cent (34.2), and gearing was per cent (6.4). As a result of seasonality and successful working capital management, the development of operating cash flow was strong at the end of Because of this, operating cash flow during the reporting period was weaker compared to the reference period. The cash flow of the reporting period comprised net operating cash flow of MEUR (5.0), net investment cash flow of MEUR -1.5 (-0.9) and financial cash flow of MEUR (-30.3). The operating cash flow for the second quarter was MEUR -3.1 (-4.9), investment cash flow was MEUR 22.8 million (-1.6) and financial cash flow MEUR (-30.2). Investment cash flow includes the maturing of a MEUR 25.0 investment held until the due date. In May, the Group prematurely amortised long-term loans to the value of MEUR 20.0 The interest rate swap related to the loan was reduced by a corresponding amount causing a non-recurring financial cost of MEUR 1.0, which is included in operating cash flow. The interest rate swap hedging the remaining long-term loan no longer meets the hedge accounting requirements under the, which is why in future it will be valued at fair value through profit and loss. The Group s financial position remained good. At the end of the reporting period, cash and cash equivalents in the balance sheet were MEUR 24.8 (27.5). The Group s Commercial Paper programme of MEUR 150 and short-term credit facilities of MEUR 31.1 were not in use in the reporting period (nor in the reference period). As a result of the premature MEUR 20 amortisation of the loan, the amount of liabilities decreased to MEUR 11.5 (31.5) at the end of the reporting period. Of all loans, 2.2 per cent (1.3) were short-term and 97.8 per cent (98.7) long-term. Interest-bearing net debt at the end of the reporting period was MEUR (4.0), meaning that the company was free of net debt.

5 4 (14) Investments and company acquisitions Gross investments in the reporting period totalled MEUR 5.4 (2.4), which amounted to 2.8 per cent (1.1) of revenue, and, in the second quarter, they were MEUR 4.7 (2.1), or 4.2 per cent (1.8) of revenue. The investments were mainly equipment-related, but they were also made in information systems and holiday timeshares for the recreational use of the personnel. Personnel The Group s average number of personnel during the reporting period was 1,510 (1,605). At the end of June, the number of personnel was 1,614 (1,687), of which permanent employees totalled 1,381 (1,460) and temporary employees 233 (227). Due to the seasonality of the business, the number of personnel varies during the year and peaks in the summer. During the reporting period, Destia continued investments in human resources development. More than 600 Destia employees have taken part in TahTo training, which supports superior and performance management. Investments in occupational safety were evident in an improvement in accident frequency. In the reporting period, accident frequency was 8.4 (18.1) accidents per million working hours. Litigation and disputes In January 2013, the environmental authority made a request to investigate Destia s Harjula pit at Mäntsälä. In summer 2012, on its own initiative, Destia informed the environmental authority that soil had been taken from outside the extraction area covered by the valid permit, but from property owned by the company. Destia continues to investigate the matter in co-operation with the environmental authority. In the dispute between Destia and Rakennus Lehto Oy concerning subcontracting contracts for nine business properties from 2008, arbitration proceedings have begun. Destia considers Lehto s claims to be groundless. Destia has won a civil case at Helsinki District Court in which Telasteel Oy demanded some MEUR 1.0 in compensation. The dispute concerned a contract in which Telasteel was Destia's subcontractor. Telasteel has appealed the decision at the Court of Appeal. In Destia s view, the demand is groundless. Short-term risks and uncertainties Destia classifies risks as market and operating environment risks, operational risks, financial risks and damage risks. The fluctuation in the economic operating environment and the uncertainty in the market situation are causing a significant risk for Destia s business. Although the number of public infrastructure projects has so far remained stable, infrastructure construction in general is expected to decline. Public sector investments in infrastructure construction are declining and economic uncertainty has also reduced the willingness of the private sector to invest. The contracting market is reflected in the competitive situation in the sector and, in Destia s core business areas, the competitive situation is expected to remain fierce. Success in tendering for regional main road maintenance contracts as well as major contracts is of paramount importance. In the management of risks caused by the operating environment, it is essential to focus on selected business areas, and to ensure operational cost-efficiency, solidity and the readiness to react in varying situations. The most significant operational risks concern project management and profitability. Uncertainty in terms of project profitability is being created by the potential increase of input prices and the ability to manage project-

6 5 (14) related risks. The key factors in reaching project targets are active project management from tender calculation to implementation, cost monitoring, ensuring resources and developing project management expertise. Destia has invested in reliable and accurate financial reporting, which is a requirement for the identification and assessment of financial risks. The reliability of financial reports is ensured through monitoring and by developing control methods. Risks concerning the financial reporting process are managed through uniform operating methods and by ensuring the reliability of reporting tools in use. Fluctuations in economic conditions may cause considerable changes on financial markets. Destia manages its financial risks in accordance with the company s treasury policy and hedges fundamental risks by derivative contracts. The company s freedom from net debt significantly reduces financial risks. Changes in the prices of oil-based commodities, in particular, cause uncertainty for the profitability of the company. The risk is being prevented by monitoring and assessing commodity price development, by ensuring key procurements economically from a project perspective, and by hedging price risks using derivative instruments. In Destia s damage risk management, the key factors are proactive project management procedures, investments in occupational safety and ensuring adequate insurance cover. Outlook for 2013 Economic uncertainty in Europe and tightening in the financial markets continue to affect the infrastructure market this year. The economic uncertainty has most affected private sector investments. During the first half of this year, infrastructure demand in the public sector has remained steady. Competition is becoming fiercer as the number of major projects declines and as projects started during previous years are being completed. Possible decisions by the Finnish government about the scheduling of infrastructure projects might alter market prospects. The shortfall in Destia s revenue in the first half of the year is a consequence of the low order book at the end of During the first half of the year, Destia succeeded, however, in significantly increasing the size of its order book. Most of the order book extends to 2014 and Measures taken to improve profitability, such as the control of fixed costs and reorganisation of the fleet, provide a good foundation for the improvement of profitability and good cash flow in future. Destia Group s 2013 revenue is expected to be lower than the previous year. Operating profit is expected to be at the level of the previous year. Vantaa, 28 August 2013 Destia Ltd Board of Directors More information President & CEO Hannu Leinonen, tel and CFO Pirkko Salminen, tel Financial reporting 2013 Destia will publish its Interim Report for January September on 29 October and its Financial Statements 2013 on 13 February 2014.

7 6 (14) CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME MEUR 4-6/ / / / /2012 Continuing operations Revenue 112,3 118,4 190,4 216,5 507,3 Other operating income 0,8 1,2 2,1 1,9 5,3 Materials and services 74,7 81,7 126,3 147,9 355,6 Employee benefit expenses 21,8 20,0 40,9 40,5 86,5 Depreciations 3,0 3,4 6,1 6,9 13,9 Other operating expenses 11,2 10,6 19,0 19,0 42,6 Operating result 2,5 3,9 0,2 4,1 14,0 Financial income 0,4 0,1 0,5 0,1 0,3 Financial expenses 1,3 2,2 1,7 2,9 3,4 Result before taxes 1,6 1,7-1,0 1,3 10,9 Income taxes 0,3-0,4-0,3-0,7-0,2 Result for the period of continuing operations 1,3 2,1-0,7 2,0 11,1 Discontinued operations Result for the period of discontinued operations 0,0 0,6 1,7-0,1-0,2 Result for the period 1,3 2,7 1,0 1,9 10,8 Other comprehensive income including tax effects: Items that will not be reclassified to profit and loss Actuarial profit and loss from benefit-based pension arrangements 0,0 0,0 0,0 0,0-0,8 0,0 0,0 0,0 0,0-0,8 Items that may be reclassified subsequently to profit and loss Translation differences of foreign subsidiaries 0,0 0,0 0,0 0,1 0,1 Cash flow hedges 0,9 0,8 0,9 0,6-0,1 0,9 0,8 0,9 0,6 0,0 Other comprehensive income net of tax 0,9 0,8 0,9 0,6-0,8 Comprehensive income for the period including tax effects 2,1 3,6 1,9 2,5 10,0 Result for the period and comprehensive income for the period belong to parent company shareholders. Earnings per share, EUR 1,85 4,03 1,47 2,73 15,90

8 7 (14) CONSOLIDATED BALANCE SHEET MEUR ASSETS Non-current assets Tangible assets Goodwill Other intangible assets Pension receivable Available-for-sale financial assets Deferred tax assets Non-current assets, total Current assets Inventories Accounts and other receivables Cash and cash equivalents Current assets, total Assets, total EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital Invested unrestricted equity fund Other items Retained earnings Equity, total Non-current liabilities Deferred tax liabilities Provisions Financial liabilities Non-current liabilities, total Current liabilities Accounts payable and other liabilities Provisions Financial liabilities Advances received Current liabilities, total Equity and liabilities, total

9 8 (14) CONSOLIDATED CASH FLOW STATEMENT MEUR 4-6/ / / / /2012 OPERATING CASH FLOWS Cash receipts from customers Expenses paid to suppliers and personnel Interests paid Interests received Other financial items Tax paid Net operating cash flow, continuing operations Net operating cash flow, discontinued operations Net operating cash flow INVESTMENT CASH FLOW Investments in intangible and tangible assets Sale of intangible and tangible assets Investments in other assets Proceeds from the sale of other investments Net investment cash flow, continuing operations Net investment cash flow, discontinued operations Net investment cash flow FINANCIAL CASH FLOWS Decrease in non-current debt (-) Increase in short-term financing (+) Decrease in short-term financing (-) Repayments of financial leasing liability Net financial cash flow, continuing operations Net financial cash flow, discontinued operations Net financial cash flow Change in cash and cash equivalents Cash and cash equivalents at beginning of financial year Effect of exchange rate changes Cash and cash equivalents at end of financial year

10 9 (14) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY MEUR Equity attributable to equity holders of the parent company Share capital Hedqe instrument fund Invested unrestricted equity fund Translation differences Retained earnings Equity 1 Jan Other comprehensive income Result for the period Other comprehensive items: Translation differences Cash flow hedges Comprehensive income for the period Equity total 30 June Total Equity attributable to equity holders of the parent company Share capital Hedqe instrument fund Invested unrestricted equity fund Translation differences Retained earnings Equity 1 Jan Other comprehensive income Result for the period Other comprehensive items: Translation differences Cash flow hedges Comprehensive income for the period Equity total 30 June Total Notes This Interim Report has been prepared in accordance with the accounting and valuation principles and it is in line with the IAS 34 standard. The Interim Report should be read together with the Financial Statements The new standards and interpretations that came into effect on 1 January 2013 have affected the method of presentation for the reporting period, not the figures presented.

11 10 (14) CONSOLIDATED INCOME STATEMENT; QUARTERLY FIGURES MEUR 4-6/ / / / / /2012 Continuing operations Revenue Other operating income Materials and services Employee benefit expenses Depreciations Other operating expenses Operating result Financial income Financial expenses Result before taxes Income taxes Result for the period of continuing operations Discontinued operations Result for the period of discontinued operations Result for the period

12 11 (14) CONSOLIDATED BALANCE SHEET, QUARTERLY FIGURES MEUR 6/2013 3/ /2012 9/2012 6/2012 3/2012 ASSETS Non-current assets Tangible assets Goodwill Other intangible assets Pension receivable Available-for-sale financial assets Deferred tax assets Non-current assets, total Current assets Inventories Accounts and other receivables Held-to-maturity investments 25.0 Cash and cash equivalents Current assets, total Assets, total EQUITY AND LIABILITIES Equity attributable to equity holders of the parent company Share capital Invested unrestricted equity fund Other items Retained earnings Equity, total Non-current liabilities Deferred tax liabilities Provisions Financial liabilities Non-current liabilities, total Current liabilities Accounts payable and other liabilities Provisions Financial liabilities Advances received Current liabilities, total Equity and liabilities, total

13 12 (14) CONSOLIDATED CASH FLOW STATEMENT; QUARTERLY FIGURES MEUR 4-6/ / / / / /2012 OPERATING CASH FLOWS Cash receipts from customers Expenses paid to suppliers and personnel Interests paid Interests received Other financial items Tax paid Net operating cash flow, continuing operations Net operating cash flow, discontinued operations Net operating cash flow INVESTMENT CASH FLOW Investments in intangible and tangible assets Sale of intangible and tangible assets Investments in other assets Proceeds from the sale of other investments Net investment cash flow, continuing operations Net investment cash flow, discontinued operations Net investment cash flow FINANCIAL CASH FLOWS Decrease in non-current debt (-) Increase in short-term financing (+) Decrease in short-term financing (-) Repayments of financial leasing liability Net financial cash flow, continuing operations Net financial cash flow, discontinued operations Net financial cash flow Change in cash and cash equivalents Cash and cash equivalents at beginning of financial year Effect of exchange rate changes 0.1 Cash and cash equivalents at end of financial year

14 13 (14) GROUP S KEY FIGURES MEUR 4-6/ / / / /2012 Revenue, continuing operations Change from previous year, % Operating profit for the period, continuing operations % of revenue Result for the period, continuing operations % of revenue Result for the period Gross investments % of revenue Balance sheet total Equity Equity ratio, % 1) Net gearing, % 2) Interest-bearing liabilities Current Ratio 3) Quick Ratio 4) Return on equity, % 5) Return on investment, % 6) Earnings per share, EUR Equity per share, EUR Average personnel Order book Research and development expenses % of other operating expenses Formulas: 1) (Equity/(balance sheet total - advances received))*100 2) ((Interest-bearing liabilities - cash and cash equivalents and held-to-maturity investments)/equity) *100 3) (Inventories + liquid assets)/current liabilities 4) Financial assets without receivables from uncompleted contracts/current liabilities without advance payments 5) (Result for the period/average equity)*100 (opening and closing balance) 6) (Result before taxes + interest costs and other financial expenses)/(invested capital average)*100 (balance sheet total - non-interest-bearing liabilities - provisions, opening and closing balance)

15 14 (14) GROUP S QUARANTEES AND CONTINGENT LIABILITIES MEUR Liabilities with mortgages as collateral Loans from financial institutions 0.1 Mortgages given 0.4 Bank quarantees Leasing liabilities Within one year Within more than one year and less than five years Within more than five years Total GROUP'S CARRYING AMOUNTS OF FINANCIAL ASSETS AND LIABILITIES MEUR 30 Jun Dec 2012 Financial assets Available-for-sale financial assets Available-for-sale financial assets (level 3) Financial assets at fair value through profit or loss Current Trade and other receivables (level 2) Cash and cash equivalents (level 2) Financial liabilities Financial liabilities at fair value through profit or loss Interest rate swaps, in hedge accounting (level 2) Other derivatives - not in hedge accounting (level 2) Financial liabilities valued at amortized acquisition cost Non-current Loans from financial institutions, interest-bearing (level 2) Financial leasing liability, interest-bearing (level 2) Current Loans from financial institutions, interest-bearing (level 2) Financial leasing liability, interest-bearing (level 2) Trade payables and other liabilities (level 2) The carrying value equals for the fair value. The levels adopted in fair value accounting: Level 1: Exchange traded securities. Level 2: Fair value determined by observable parameters. Level 3: Fair value determined by non-observable parameters. SHARES AND SHAREHOLDERS Shareholder Number of shares % Voting right Share capital EUR State of Finland ,0 1 vote/share The information provided in the Interim Report has not been audited. All figures have been rounded up or down, which is why the sums of individual figures may differ from the sums presented.